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An eight year statute of repose period was triggered by the date of substantial completion of panel installation instead of the subsequent date of substantial completion and certificate of occupancy of the whole house. A homeowner sued a company that manufactured structural insulated panels (SIPs) used in constructing his house. He claimed the panels were defective and allowed water intrusion which caused the panels to rot and result in structural damage to the house. The panel manufacturer was entitled to summary judgment based on the state’s statute of repose. The court concluded the time period ran from the date the panels were installed because they began serving their function as of that date even though the house was not completed until two years later. Lawrence v. General Panel Corp., 425 S.C. 398 (2019).

This case was before the South Carolina Supreme Court to decide a certified question form the U.S. District Court of the District of South Carolina. The statute in question provides: “No actions to recover damages based upon or arising out of the defective or unsafe condition of an improvement to real property, may be brought more than eight years after substantial completion of the improvement.”

The issue of entitlement to summary judgment to enforce the statute of repose depended on the date of “substantial completion.” Was substantial completion the date when the panels were installed or was it two years later when the house was finished and received its certificate of occupancy? This question had been answered in an earlier court precedent (Ocean Winds). But the plaintiff argued that an amendment to the statute superseded the Ocean Winds decision.

In the Ocean Winds decision, the court considered a situation of alleged defects with window installation. It held that the statute of repose began running when installation of the windows was complete. The amendment to the statute added a sentence as follows: “For any improvement to real property, a certificate of occupancy … shall constitute proof of substantial completion of the improvement … unless the contractor and owner … establish a different date of substantial completion.”

By adding this sentence, the plaintiff argued that the state legislature intended the date of substantial completion to always be the date of issuance of the certificate of occupancy.   In rejecting that argument, the court held that if the legislature had intended that result it would have more clearly stated so. The court found that the language of the statute referencing “completion of … a specified area or portion” would not be necessary if the legislature had intended the statute to run only after the entire project was completed.

Moreover, said the court, “The SIPs are structural. Their purpose is not only to provide structure upon completion of the home, but also to provide the structure necessary for the rest of the home to be constructed…. The SIP framing system must be in place to enable other subcontractors to install electrical, flooring, roofing…. As subsection 15-3-630(b) contemplated, the SIP structural system began to serve ‘the purpose for which it was intended’ long before the date that [homeowner] would have us find the statute of repose began to run.”

 

 

About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with ConstructionRisk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 21, No. 6 (July 2019).

Copyright 2019, ConstructionRisk, LLC